Consumer Focused Health

There’s an interesting take on how to insure the currently uninsurable written by Bob Hopper on the HSA Crusader Web Log (via CDH Compass). Its a conversation at the ground level of an insurance agent speaking with a potential customer.

I was talking with a 44-year old about applying for an individual health insurance policy. This person was not happy with insurance companies. Frankly, the following is not my favorite conversation to have with a client:
“I’m afraid the insurance company will decline your application for health insurance.”
“But why? I’m healthy!”
“I understand, but let me see if I can explain the problem. You are indeed healthy, but you are also taking three quite expensive medications. You take a cholesterol medication, an allergy medicine, and a sleep medication. The cost is about $300 per month or $3,600 per year.” (To show the client the real cost of prescriptions, I usually visit a site that shows prescription drug prices, such as www.drugstore.com.)

“Well, can I get a plan without prescription drug co-pays? I only want insurance for the big expenses.”
“That’s a reasonable request. Normally, when people are declined for coverage, they realize they want insurance for what it was intended to do — provide protection from large, unexpected medical bills, such as a three to four day hospital stay that averages $30,000.

“Can’t they just exclude drug coverage altogether?”
“I wish they could, but virtually all plans include benefits for prescription drugs and office visits.”
“Can’t they exclude coverage for these conditions and give me insurance for big problems, such as a serious accident, heart surgery, or cancer?
“Insurance companies in California no longer exclude certain conditions; they accept or decline your coverage.”
Finally, the client says with frustration, “What good are insurance companies?

His take is essentially that people with existing conditions, even at absolutely low risk for a catastrophic medical incidence are unable to afford any insurance, because so many other things are bundled in (e.g., pharmaceutical, office visits, etc) even in high deductible plans. It sounds like he wants a more customizable insurance plan (with riders, etc) that in theory could look like the policies you receive in auto, where collision is separate from liability. This could address some of the moral hazard issues raised in Matthew Holt’s commentary (from 2003) on individual plans and some of the issues with free-market insurance. Essentially, by eliminating most of the benefits associated with sub-catastrophic events and you could have a much cheaper, emergency only or event-driven policy that would pluck more from a community pool, similar to how cancer-only insurance works today.

I think it really brings home how distorted the market is– and for those who want to buy an insurance product and can’t due to regulations–its a sign that the regulations have gone too far and failed those they are trying to protect. While I know the individual insurance space is murky and hard to understand, clear choices for non-comprehensive insurance should be available for those who would rather shop for their own care when they can and get coverage only for those events that are truly emergencies.

Richard Eskow has an interesting article on a post-mortem of Santa Barbara’s RHIO (full report here) done by the California Health Care Foundation.

The authors list many issues for the failure of the experiment: lack of a compelling business case, distorted economic incentives, passive leadership among participants, vendor limitations, software delays, and privacy and security issues as factors that played a significant role in the project’s eventual closure

Overall, it appears the lack of a compelling business case undermined the whole attempt– as participants could not rally around any one defining approach or benefit that would sustainably change any aspect of the business by creating benefits or addressing motivations of specific parties.

This is a key reminder emerging from this failed experiment– that innovation happens because it helps one party compete better. This is why innovation occurs at the fringes, rather than for the masses. Change is hard, and unless someone benefits enough to grow and change the way the marketplace works, nothing is going to happen.

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The WSJ’s Health Blog reports that some physicians are making patients sign a contract that requires them to ask for permission prior to grading that physician online.

While there are problems with current rating systems, the message such a contract sends to new patients, in my mind, is much worse. It comes across as defensive and uncaring– whereas asking for feedback on how they could improve their practice would serve the same purpose and significantly reduce the true complaints that make it out to the web.

There are a number of issues around sample size, anonymity, agendas, etc with the current rating tools, but given that physician practices gain patients through word of mouth, proactively muzzling one of the means of spreading that word seems enormously counterproductive.

The new consumer-focused world is not one where doctor knows best…physicians would be better suited to spend their energy working to provide better service for those who come to them in times of need–after all, doctors have sworn to serve, not to be served. Some of us appear to have forgotten this…

Part II of a series. Part I is here.

In the US healthcare system, the predominant non-government source of health “coverage” comes from the employer. While these strange bedfellows may have been put together by wage freezes during World War II and tax laws favoring employer purchasing, it would be expected that employers receive significant benefits for the billions spent annually on healthcare as the predominant portion of the benefits package.

So what do employers get out of the bargain? And where would we expect them to do to improve those returns? Lets take a look.

Reasons employers offer healthcare:

• Part of package to attract and retain talented employees
• Tax savings relative to salary
• Improve worker productivity
• Community goodwill

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The RWJF has published the 9 finalists for its Disruptive Innovations in Health and Healthcare competition.

They have some interesting entries, although I think they significantly constrained their field by focusing on nonprofit organizations only.

Nonetheless, some interesting ideas, so vote for your favorites.

http://www.changemakers.net/en-us/competition/disruptive

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Susan Promislo said…

Hi Vijay,

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I’ll be attending the 2nd National Consumer Driven Healthcare Summit in Washington, DC Sept 26-28. I’d be delighted to meet any of my readers that will also be attending, so please let me know if you will also be in town.

Also, today (Friday the 17th of Aug) is the last day to receive the early bird discount– so if you’re planning on coming, but haven’t signed up yet, today may be the day to confirm. All details are at http://www.consumerdrivensummit.com/

Consumer-focused healthcare will be looking to expand its horizons with some interviews and potentially some podcasts from attending luminaries. Please let me know if there is anyone in particular you would like to hear from on the list of attendees.

Already on the docket is a conversation with Mary Kate Scott, author of Health Care in the Express Lane: The Emergence of Retail Clinics, who will share her perspectives on future changes coming out of the retail clinic boom.

The medical system is becoming increasingly expensive and complex– with exponential growth of additional symptoms, diseases, fellowships, technology, standards of care, research studies, journals, and quality metrics on a yearly basis.

Thinking about all that is complex– and yet we expect our physician colleagues to run ever faster and do ever more with ever shrinking reimbursement for their time. Its no wonder they’re at wits end!

The problem in healthcare is a focus on doing/ knowing/ fixing more rather than doing what is necessary– making ever more investments in the “nice to have” without the financial counterbalance at the point of service.

Charlie Baker of Harvard Pilgrim highlights an excellent article in the Boston Globe titled “The folly of the 1% policy“. The premise of the article is the position that “if there is a 1% chance of , we must prepare for it as if it were a certainty”

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Scott Shreeve has an interesting marketing take on CDHP plans, and a good one. Rather than emphasizing the high deductible (more relevant to insurance thinking), he emphasizes the low premium (certainly changes the dynamic of the conversation with consumers)

The whole notion of “high-deductible” is a misconception – why not change the paradigm by saying “Low-Premium” Health Plan (LPHP). The point is that the we are talking about insurance – you are buying risk protection from someone who is willing to assume it in exchange for your money. The more risk you want to avert, and the lower co-payments you want, the higher your monthly premium is going to be. If you are willing to go at risk, up to a defined level ($5,000 my case), you can save dramatically on your monthly insurance premiums. In addition, as you play the numbers out, your overall spending can also be 15-20% less with a LPHP over a traditional plan. This doesn’t even account for the behavior change that occurs when you are spending your own money and therefore become engaged in the decision making process.

As I posted before, the sticker shock of medical items is not financially worse than watching all the premium money previously being paid go “poof” every month. And, as I mention in my metrics article, what is being rewarded today certainly isn’t working– why shouldn’t we look to reduce excess premiums being paid as opposed to overall cost of healthcare? After all, people aren’t looking to reduce overall cost of consumer and high tech sectors despite outsized gains in those industries the past few years.

For most people (estimated 80-90% of employees), a CDHP plan will put them out ahead if most of premium savings (at least on for at-risk insurance) are given back in the form of HSA contributions (zero-sum balance).

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I was discussing disruption and marketing with a friend of mine. As is sometimes the case, when one’s friends lean toward academic & entrepreneurial types, we started talking about innovation. Clayton Christensen’s work on disruptive change came up, and reminded me of a simple truth: Customers look to satisfy needs.

Customers want to “hire” a product to do a job, or, as legendary Harvard Business School marketing professor Theodore Levitt put it, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”

It strikes me that one of the core issues with the health system today is that we focus on systematic, top-down costs combined with delivery and payment asymmetry. We have fragmented networks of providers looking to maximize reimbursement. We have payors ranging from government to employers to insurance companies. We have lost track of why people are paying for medical care to begin with–or we are shortchanging the other expenditures that serve the same “jobs” as health.

So lets step back and think about what jobs people are “hiring” health practitioners and products to do. In many cases, this has nothing to do with wonky goals like “universal coverage”, “quality ratings”, or “cost-efficient care”. Most people care not about cholesterol or C-reactive protein or PSA levels until the heart attack or cancer words spring up. So what are people looking for when they go to the healthcare system for help?

Some pleas from my days on the wards and clinic come to mind for me:
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The pharmaceutical industry has been fairly criticized for its blockbuster mentality– focusing on limiting new drug development to narrow targets relevant to the masses instead of more specific personalized targets that can make real differences for individuals with specific diagnoses or genetic markers.

While such criticism is fair, seeking new mechanisms of action is risky (see torcetrapib) in the world of $800M of R&D spent on new drug approvals. That risk has often been compounded by the approval process of paternalistic regulatory agencies and the simplistic heuristics/formularies used by providers to recommend specific treatments today.

So why is this a problem in a world increasingly moving toward customized, Long tail approaches? The core issues have to do with sample sizes, need for probabilistic thinking, and provider bandwidth

Sample sizes: Current studies are becoming bigger to create more statistical “power”. A risk-averse FDA wants to ensure that anything coming onto the market has large study populations with data over long periods of time, so that side effects become apparent before the drug hits the market. What is often forgotten is that the more expensive the trial and the longer the duration, the larger the target market has to be to justify the expense. This works for blockbusters, but the approach will need to be refined to have reasonably priced medicines targeted to smaller segments of the population (its also harder to fill a large study with a smaller target population).

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